July 2019 Health Sector Economic Indicators Briefs

These monthly briefs analyze the most recent data available on health sector employment, spending, prices, and utilization—helping to fill gaps in the official government data.

Below are highlights from this month's reports:

Spending: Modest acceleration in health spending continues

• At $3.81 trillion (seasonally adjusted annual rate), national health spending in May 2019 was 5.0% higher than it was in May 2018. The May 2019 nominal gross domestic product (GDP) growth over a 12-month period was 3.8%, and the resulting health spending share of GDP was 17.9%. We have hovered around this 18% level since early 2016. Also note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to 4 than 3.
• Spending in May 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 7.8%. Growth in spending on physician and clinical services was the slowest, at 3.5%.
• This month’s spending brief incorporates data from the Bureau of Economic Analysis’ third estimate of National Income and Product Accounts for the first quarter of 2019. The result is an upward revision of first quarter national health spending growth to 4.8%, year over year. This revised first quarter estimate, combined with our May estimate of 5.0% year-over-year growth, year-to-date growth of 4.9% and the lower 4.0% growth rate in the fourth quarter of 2018, continue to support our previous observation that health spending has accelerated modestly so far this year.

Labor: Q2 2019 health care hiring ends higher in June, but overall is down from previous six months

• Health care added 34,900 new jobs in June, near the 12-month average of 33,600. June hiring is up from April and May, but overall Q2 2019 is down from the very robust hiring of the previous two quarters and looks more like the first three quarters of 2018.
• Year over year (June 2019 compared to June 2018), health jobs grew by 2.5% while non-health jobs grew by 1.4%. Combined with downward revisions to non-health jobs through April, the health share of total jobs is at a new high of 10.83%.
• Hospitals continue steady hiring, adding 11,200 jobs (average 8,800), Ambulatory care settings added 18,500 jobs (average 21,500), and nursing homes added 5,200 jobs (average 3,200).

Prices: With drug prices falling, health care price growth drops to low 1.4% rate

• In June 2019, annual growth in the Health Care Price Index (HCPI) was 1.4%, down from 1.5% in May. With slightly higher price growth for hospitals balanced by barely lower price growth for physicians, and minimal changes otherwise, it was the astonishing fall in year-over-year prescription drug prices (-2.0%) that drove down the HCPI (this is the lowest year-over-year rate since December 1967). We have observed exceptionally slow growth in prescription drug prices since July 2018 – an annual rate of -0.1% for these 12 months, the lowest since calendar year 1973.
• Overall health care prices were growing more slowly than economy-wide prices for a record, 22 months as of April, but in May the growth rates for both series were at 1.5%. Thus, the streak may have ended, but in any case, this has been stark behavior – health care price growth is no longer driving up economy-wide price growth. As we note each month, health care inflation is amazingly low for this stage of the economic recovery. June 2019 was the 120th month of expansion (tying it for the longest in U.S. history) following the Great Recession, yet the HCPI growth is well below 2%.

These monthly briefs analyze the most recent data available on health sector employment, spending, prices, and utilization—helping to fill gaps in the official government data.

Below are highlights from this month's reports:

Spending: Modest acceleration in health spending continues

• At $3.81 trillion (seasonally adjusted annual rate), national health spending in May 2019 was 5.0% higher than it was in May 2018. The May 2019 nominal gross domestic product (GDP) growth over a 12-month period was 3.8%, and the resulting health spending share of GDP was 17.9%. We have hovered around this 18% level since early 2016. Also note that while laypersons often say that U.S. health care spending is 3 trillion dollars, it is now much closer to 4 than 3.
• Spending in May 2019, year over year, increased in all major categories. Spending on prescription drugs grew the fastest, at 7.8%. Growth in spending on physician and clinical services was the slowest, at 3.5%.
• This month’s spending brief incorporates data from the Bureau of Economic Analysis’ third estimate of National Income and Product Accounts for the first quarter of 2019. The result is an upward revision of first quarter national health spending growth to 4.8%, year over year. This revised first quarter estimate, combined with our May estimate of 5.0% year-over-year growth, year-to-date growth of 4.9% and the lower 4.0% growth rate in the fourth quarter of 2018, continue to support our previous observation that health spending has accelerated modestly so far this year.

Labor: Q2 2019 health care hiring ends higher in June, but overall is down from previous six months

• Health care added 34,900 new jobs in June, near the 12-month average of 33,600. June hiring is up from April and May, but overall Q2 2019 is down from the very robust hiring of the previous two quarters and looks more like the first three quarters of 2018.
• Year over year (June 2019 compared to June 2018), health jobs grew by 2.5% while non-health jobs grew by 1.4%. Combined with downward revisions to non-health jobs through April, the health share of total jobs is at a new high of 10.83%.
• Hospitals continue steady hiring, adding 11,200 jobs (average 8,800), Ambulatory care settings added 18,500 jobs (average 21,500), and nursing homes added 5,200 jobs (average 3,200).

Prices: With drug prices falling, health care price growth drops to low 1.4% rate

• In June 2019, annual growth in the Health Care Price Index (HCPI) was 1.4%, down from 1.5% in May. With slightly higher price growth for hospitals balanced by barely lower price growth for physicians, and minimal changes otherwise, it was the astonishing fall in year-over-year prescription drug prices (-2.0%) that drove down the HCPI (this is the lowest year-over-year rate since December 1967). We have observed exceptionally slow growth in prescription drug prices since July 2018 – an annual rate of -0.1% for these 12 months, the lowest since calendar year 1973.
• Overall health care prices were growing more slowly than economy-wide prices for a record, 22 months as of April, but in May the growth rates for both series were at 1.5%. Thus, the streak may have ended, but in any case, this has been stark behavior – health care price growth is no longer driving up economy-wide price growth. As we note each month, health care inflation is amazingly low for this stage of the economic recovery. June 2019 was the 120th month of expansion (tying it for the longest in U.S. history) following the Great Recession, yet the HCPI growth is well below 2%.